MACA Limited

 

MLD Details
 
Guidance Update Amid COVID-19 led Outbreak: MACA Limited (ASX: MLD) is an integrated services contractor dedicated in the provision of contract mining services, civil contracting services, and mineral processing services across Australia. The company also offers contract mining services in Brazil, South America. On June 1, 2020, the company updated the market that it is taking necessary steps to continue its business operations, while working proactively with its clients, suppliers, and employees to manage the impact of Covid-19.     In light of this, the company expects revenue to be more than $800 million for the year ended 30 June 2020. EBITDA is expected to be in the band of $110 million to $114 million (excludes the impact of impairment and forex).
 
Managerial Changes: Recently, the company stated that it has appointed Mr Mike Sutton to join the company as a Managing Director, effective from June 1, 2020. Mike was hired as CEO in late February and will now hold the collective role of Managing Director and CEO of MACA.
 
1HFY20 Key Highlight: During the period, the company reported net profit after tax of $12.0 million, an increase of 48% on pcp, and revenue of $364 million, up 12% on pcp. The company’s EBITDA for H1FY20 stood at $54.4 million, which soared 97% on pcp.  The company declared a dividend of 2.5 cents per share in 1HFY20, up 25% on pcp. One of the major highlights of the period was the five-year mining contract award in November 2019 from FQM Australia Nickel Pty Ltd at the Ravensthorpe Nickel Project. This contract is expected to generate ~$480 million in revenue over the initial five-year term and will diversify MLD’s client base and commodity exposure. During the period, MACA Interquip completed mill installation for Adaman Resources at Kirkalocka Gold Project for revenue of around $30 million.
 

Half-Year Sneak Peek (Source: Company Reports)
 
What to Expect: The company maintains a positive outlook for FY20, supported by a strong work in hand position, favourable market conditions and a strong pipeline of opportunities with existing and new clients.
 
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of MLD declined by 23.48% in the last six months and is currently trading above than the average of its 52-week trading range of $0.487 - $1.20. We have valued the stock using a Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price with higher single-digit upside (in % terms). For the purpose, we have taken peers like Perenti Global Ltd (ASX: PRN), Macmahon Holdings Ltd (ASX: MAH) and NRW Holdings Ltd (ASX: NWH). Considering the company’s strong work in hand position, favourable market conditions, strong pipeline of opportunities with existing and new clients, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $0.955, up by 8.532% on 1 June 2020.
 
 
MLD Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 
 
 

Senex Energy Limited

 

SXY Details
 
SXY Plans to Reduce Gas Supply to GLNG: Senex Energy Limited (ASX: SXY) is in the production, development, and exploration of petroleum with a market capitalisation of $335.16 Mn as on 1 June 2020. Recently, the company announced that is planning to reduce natural gas supply to GLNG of approximately 1 PJ for a time span from June to August 2020, due to GLNG’s currently lower LNG offtake requirements. Moreover, the company stated that Natural gas production persists to outperform in the Surat Basin, with production now exceeding 34 TJ per day. Given continued production and reservoir outperformance, the company plans to decrease the number of wells to be drilled at Atlas to 45 wells from 50 wells.
 
FY20 Guidance: Following the robust production performance across Senex’s Surat Basin assets, in the current COVID-19, the company now expects FY20 production outlook to be 2.0 – 2.1 mmboe (down from 1.8 – 2.0 mmboe).It has also increased its FY20 EBITDA guidance to $45 – 55 million, up from $40 – 50 million. The company is well-positioned to continue to deliver material operating cashflow in a lower oil price environment.
 
Other Recent Update: In another update, the company stated that it has agreed a further domestic gas sales agreement with power generator CleanCo Queensland for 2.55 petajoules (PJ) of natural gas.
 
March Quarter Update: During the quarter, total production increased by 31%, on a sequential basis and came in at 589 kboe. Gas production stood at 422 kboe, up 61%, due to continuing Surat Basin ramp-up and the first full quarter of production from the Gemba field in the Cooper Basin.
 

Key Highlight (Source: Company Reports)
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of SXY declined by 32.35% in the last six months and is currently trading below than the average of its 52-week trading range of $0.12 - $0.425. The company has a P/E ratio of 35.94x. We have valued the stock using EV/Sales-based relative valuation approach (illustrative), and arrived at a target price, which is offering an upside of lower double-digit (in percentage terms). Thus, considering the strong liquidity position and guidance for FY20, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.23 per share as on 1 June 2020. 
 
 
SXY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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